Sunday, May 18, 2014

Cronyism, not "Conspiracy", is the Problem in New Jersey

The New Jersey Star-Ledger hinted at A Tesla conspiracy in NJ; a reference to efforts in the state to ban Tesla from selling its electric cars directly to consumers. 

New Jersey recently enacted a rule, through its Motor Vehicle Commission, stopping Tesla Motors from selling its electric cars directly to NJ consumers. Governor Chris Christie noted that he was obligated to enforce a long-standing state law that he interpreted as forbidding direct car sales to consumers by manufacturers.

In response, notes the Star-Ledger, two NJ politicians have proposed amending the existing mandatory franchise law to allow electric car makers to sell direct, while continuing to compel gas-powered car makers to sell only through independent dealerships.

The Star-Ledger was speaking "tongue-in-cheek" about a conspiracy, but the paper begged the question: What is really going on in New Jersey? I left these comments:

  • Franchise dealerships get government favoritism through a re-existing law forbidding car manufacturers from selling cars directly to consumers.
  • Greenwald and Eustace want to carve out a special exemption to that law for electric car makers, a government favor to Tesla.
  • Tesla buyers get a special federal tax credit of $7500 that gas-powered car buyers don't get, which is government favoritism for Tesla. 

The problem is not "conspiracy". The problem is plain, old-fashioned cronyism. The right solution is to eliminate the pre-existing franchise-mandate, extend equal tax credits (i.e., lower taxes) to all car consumers, and leave car manufacturers, consumers, and franchise dealerships free to contract voluntarily to mutual advantage on a level legal playing field, also known as a free market.

Related Reading:

Tesla the Beneficiary of Crony Laws


Mike Kevitt said...

Overall, I see it your way, but in detail I see it different, and I think the difference is important.

The cronyism is between only the gvt. & the dealers, at the expense of manufacturers.

The 'conspiracy' is to recognize Tesla's right to sell direct to consumers, as Tesla consumers are already recognized in their right to pay less in taxes. This removes the cronyism between the gvt. & the dealers regarding Tesla, as Tesla consumers already enjoy their right to be taxed less.

If the 'conspiracy' succeeds, the only problem remaining is the remaining cronyism between the gvt. & the dealers regarding manufacturers of gasoline or diesel fueled autos. That's what needs to be resolved by the solution you propose. I think these details are important, but maybe I'm actually being picky.

Michael A. LaFerrara said...

You're not being picky.

I guess there's 2 ways to look at it. On the one hand, Tesla gets a bit of freedom in being allowed an exemption from the law, and its customers enjoy lower taxes. That's good, as far as it goes.

On the other hand, the law is being manipulated to favor electric car makers. It's back-door cronyism. The mixed economy can get complicated.